Going Where The Money Is

The government agency that seizes goods gained through illegal activity is going after a couple of banks that issued mortgages to a grow-op house. Does this signal a new thrust by the Civil Forfeiture Office?

I find it curious that the BC government agency that seizes proceeds of crime is targeting two of Canada’s largest banks because they provided mortgages for a home that contained alleged grow-ops.

The Civil Forfeiture Office claims in a BC Supreme Court writ that Bank of Montreal and Royal Bank of Canada were “willfully blind” to the possibility (which they called a fact) that the owner was laundering money through their institutions.

I won’t comment on the case because 1. I don’t know anything about it and 2.it would be illegal and irresponsible for me to do so. That’s what courts are for.

But I do find the precedent fascinating because it involves an issue of responsibility, as well as BC's two most famous industries: Real estate and, so we’re told, marijuana growing.

Opening a lot of new doors

Whether the banks "willfully" supported a grow-op by providing mortgages must be determined by the courts. But it seems to me the banks are in the same position as hundreds of other, albeit smaller, homeowners who have become victims of the ever burgeoning (and creative) grow-op industry.

The problem has been persuasive for years in the region. Municipal officials routinely talk of how grow-ops pop up in rented houses like clockwork. They even have scenarios of how it works. They’re joined in this by near-banks like Vancouver City Savings Credit Union which some years ago even issued a booklet for landlords on how to spot whether their house is being used as a grow-op.
 
I don’t know if any of these landlords ever had their homes seized by the government's forfeiture group because grow-ops were found in them. I’m sure their mortgage providers never have been.
 
So that begs a couple of questions. One is who exactly is responsible for what goes on in a house? And another is why is the government suddenly trying to make the banks pay, which implies responsibility?
 
It could be a case so egregious that the government believes something should be done; or it could be a case of the agency trying to set an example. The cynical point of view might be that that the government agency, which is affected by government financial constraints like every other arm of government, is, as the saying has it, going to “where the money is”.
 
Whatever. The reality is that this is a huge precedent setting case that could have wide repercussions. If it flies, it will open many doors for an agency that seems to have some amazing power.
 
Are landlords responsible for what goes on in houses they rent out? And in corollary, is a bank that issues a mortgage to someone who uses a home for illegal purposes also responsible?
 
If so, I bet a lot of other lenders, financiers and landlords are shaking right now.

• Tags
  • civil forfeiture office, 
  • tony wanless, 
  • City and Government, 
  • Banking, 
  • Finance and Legal, 
  • Homes and Real Estate